Oct 20, 2025
If you own an incorporated business in BC, you’ve probably asked yourself this question more than once:
“Should I pay myself a salary, dividends, or both?”
The answer depends on your goals! The way you pay yourself can affect your taxes, retirement savings, and even your ability to qualify for a mortgage. Let’s walk through the main differences so you can make a confident decision this year.
Salary vs. Dividends: What’s the Difference?
When you’re incorporated, you’re both an employee and a shareholder of your company.
- A Salary is what you earn as an employee. It’s a business expense that reduces your company’s taxable income, and it’s taxed personally.
- Dividends are payments from the company’s after-tax profits. They don’t reduce the company’s taxes, but they’re usually taxed at a lower rate personally.
You can choose one or a mix of both. The right balance depends on your personal goals and your company’s financial situation.
CPP Contributions: What You Really Need to Know
Here’s the short version for 2025:
- Salary income pays into CPP, which means both you and your company contribute.
- Dividends don’t have CPP, so you save that cost, but you also won’t build CPP benefits for retirement.
For 2025, CPP contributions apply on salary up to $71,300, and the total combined contribution (employee and employer) tops out just over $8,000.
If you like the idea of building future CPP income, salary helps. If you’d rather keep cash in your pocket now and have your own retirement plan, dividends might make more sense.
RRSP Contribution Room
Only salary builds RRSP contribution room.
If you’re maxing out your RRSP every year or plan to start contributing more, make sure you take at least some salary.
Dividends will not increase your RRSP limit.
Childcare Deductions
To claim childcare expenses (e.g. daycare, pre-school, afterschool care, summer camps), at least one spouse needs to be earning employment income.
If you’re only taking dividends, you may lose that deduction. A small salary, even $15,000 to $20,000, can help keep that tax break available.
Qualifying for a Mortgage
Mortgage lenders like predictable, steady income, which means salary usually looks better on paper than dividends. The bank will want to see two years of consistent income.
If you’re planning to buy a home or renew a mortgage within the next two years, it’s worth talking to your accountant and mortgage broker about taking a salary.
Salary as a Business Expense
Salary is a tax-deductible expense for your corporation. Dividends come from profits after taxes are paid.
The trade-off is that you’ll pay personal tax on salary, but your company pays less. It’s all about balancing your corporate and personal tax bills, and good planning can make a big difference.
How Deximal Can Help
Figuring out the right mix of salary and dividends is not one-size-fits-all.
At Deximal, we help business owners:
- Compare the tax impact of salary and dividends
- Plan RRSP and CPP strategies that fit your retirement goals
- Manage CRA payments and year-end tax surprises
- Align payroll setup with your business growth
We keep things simple, clear, and proactive so you can focus on running your business without second-guessing your pay structure.
Join Our Exclusive Live Webinar: Incorporation Made Simple
If you’re considering if incorporation is right for your business, this webinar will help you. Join Alicia Loewen on November 19 at 11:00 a.m. PST for an easy-to-follow session that explains how incorporation and tax planning really work for small business owners.
In this live Q&A session, you’ll learn:
- The real tax differences between being a sole proprietor and incorporating
- Smart ways to pay yourself through salary, dividends, or a mix of both
- When incorporation actually saves you money
- How the small business deduction can lower your corporate tax rate
- How to defer personal taxes by leaving profits in your company
- Future tax advantages when you retire or sell your business
💡 Registration Fee: $21.00
📅 Reserve your spot now: Register for the Webinar
Seats are limited, and live questions are encouraged. Join us to get clear, practical answers to the questions every business owner should ask before year-end.
About Alicia Loewen
Founder & CEO, Deximal Accounting Inc.
Before launching Deximal in 2015, Alicia spent nearly a decade in public tax and corporate finance, advancing into senior accounting roles that gave her a deep understanding of both strategy and detail. But her first love has always been teaching. Now she gets to do both, helping business owners make sense of their numbers and guiding them through tools and systems that simplify financial management.
As a fellow small business owner, Alicia knows the balancing act of building something meaningful while still finding time for real life. That lived experience shapes her approach with clients, where she turns complex tax and accounting concepts into clear, doable steps with zero judgment and plenty of heart.
When she’s not supporting clients, Alicia can usually be found managing a different kind of project on her family’s 1,600-tree organic apple orchard, alongside her husband and their two pint-sized “assistants.”